Securities class-action settlements hold steady, despite pandemic — report

Settlements in securities class-action cases in 2020 were in line with previous years, despite the COVID-19 pandemic disruption, according to a report released Wednesday by Cornerstone Research.

The report, Securities Class Action Settlements: 2020 Review and Analysis, found that courts approved 77 settlements totaling $4.2 billion in 2020, up from the 74 settlements totaling $2.1 billion the previous year. Moreover, the median settlement value in 2020 — $10.1 million — was down 13% from 2019 but was still 19% higher than the prior nine-year median. The average settlement amount in 2020 was $54.5 million, representing a 15% increase over the prior nine-year average, the report said.

"Any disruption in settlement rates as a result of the COVID-19 pandemic appears to have been temporary, with the overall number of settlements for 2020 in line with recent years," said Laura E. Simmons, a Cornerstone Research senior adviser and report co-author, in a news release. "It will likely be at least a couple of years before we learn whether COVID-19-related allegations have had an impact on other settlement trends."

The proportion of settlements with public pension plan lead plaintiffs rebounded to 40% in 2020, up from the all-time-low of 27% in 2019. The report also found that in larger cases — those with "simplified tiered damages" greater than $250 million — nearly 60% had a public pension plan as lead plaintiff.

"In several respects, after an unusual year in 2019, cases settled in 2020 represented a return to levels prevalent in prior years," said Laarni T. Bulan, a Cornerstone principal and report co-author, in the news release. "However, one prominent trend continuing from 2019 is an increase in the size of issuer defendant firms."

The size of issuer defendant firms by median total assets involved in settled cases in 2020 increased by 34% over 2019 and by more than 125% over the previous nine years, according to the report. Cornerstone noted that the population of public firms has been declining, and those companies that remain are larger.